Construction Law/Price Adjustment

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Question
QUESTION: Dear Madam,

In accordance with Sub-Clause 14.3 of FIDIC MDB Harmonized Conditions of Contract 2010 edition,

“The Contractor shall submit a Statement in six copies to the Engineer after the end of each month”

Is the submission of Statement at the end of each month is binding on the Contractor? Is the Contractor can submit Statement other than one month period?

My second question relates to Sub-Clause 13.8 [Adjustment for changes in Cost], this Sub-Clause states,

“ “Ln”, “En”, “Mn”, … are the current cost indices or reference prices for period “n”, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates); and”

If the Contractor submit Statement for the period of 3 months, then is it correct to use indices applicable on 49th from the last day of the period? Or is it necessary to divide the works month wise in order to apply indices separately for each month?   

Thanking you in anticipation.

Regards,

Umer Shabbir

ANSWER: Dear Umer,
There is no sanction in the Contract for the case when the Contractor did not submit his Statement after the end of EACH MONTH. This provision try to put some order in the Contractor's submissions for payment, so that they would not be too often and paralyze the work of the Engineer being busy with issuing payment certificates and having no time for other issues. The Payment certificates can be given less often that every month.
In 13.8 it is written "49 days prior to the last day of the PERIOD (to which the particular Payment Certificate relates)", it does not refer to the month. This is also a clue to understand that the "end of the month" from your first question is not a must.
Therefore, 13.8 referring to the end of the period, not of the month, there should be no division into months of the period of the Payment Certificate, but simply the date 49 days before the last day of the period in its entirety.
Hope it helps.
Regards,
Alina

---------- FOLLOW-UP ----------

QUESTION: Thanks. Your comments have strengthen my opinion but some people have different stance. According to Sub-Clause 14.3(a), the Contractor is required to include in IPC the estimated Contract value of the Work up to the end of each month. Some people thinks that the Price Adjustment formula of Sub-CLause 13.8 is therefore designed for one month calculation and by applying the indices 49th day of the period of IPC, it will not reflect the true computation of cost as foresee by the formula.

Your opinion is requested in this regard.

Regards,

Umer Shabbir

Answer
In Sub-clause 13.8 it is defined:
<<“Ln”, “En”, “Mn”, … are the current cost indices or reference prices for period “n”, expressed in the relevant currency of payment, each of which is applicable to the relevant tabulated cost element on the date 49 days prior to the last day of the period (to which the particular Payment Certificate relates).>>
If the payment certificate refers to a PERIOD of several months and 13.8 says "49 days prior to the last day of the PERIOD (to which the particular Payment Certificate relates)", then so it should apply, i.e. to use the cost indices on the date 49 days prior to the last day of this PERIOD. There is no doubt about this.
Every Certificate that I've met, that referred to a period of time bigger than 1 month, used the costs indices on the date 49 days prior to the last day of the period to which the respective Certificate related. I did never meet certificates related to more than 1 month that used indices on each month from the period of the certificate.
Regards,
Alina

Construction Law

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Alina Valentina Oprea

Expertise

I can answer to questions regarding FIDIC 1999 contracts, including practical use of these conditions of contract, as well as to questions regarding dispute boards, both from theoretical and practical point of view. I cannot answer to questions related to other kind of contracts or to procurement process, except to some (limited) extent.

Experience

Implementation of works contracts (FIDIC 1999) financed by different financial institutions, including European Union; claims and disputes; dispute boards See more on www.alinaoprea.com

Organizations
Dispute Resolution Board Foundation

Publications
see http://alinaoprea.com/publications/ ; DRBF Forum Newsletter; Drumuri si Poduri; Revista Constructiilor; SIDiR Newsletter

Education/Credentials
Graduated the University of Civil Engineering Bucharest, Faculty of Railways, Roads and Bridges (1985-1990); Trained under Mr. Gwyn Owen’s pupilage program for arbitrators/adjudicators under FIDIC mentoring program (2006 – 2007)

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